We are reiterating our “Outperform” recommendation on Superior Industries International Inc. ( SUP - Analyst Report ) . The company continues to benefit from a wide customer base along with long-term business agreements with clients which ensures financial stability. Together with the strategic acquisitions, competent management and production efficiencies, the company is also reaping the benefits from the global expansion of the automotive industry.

Superior Industries witnessed a 17% year-over-year decline in net income in the first quarter of 2012. Earnings declined to 25 cents per share from 29 cents in the same quarter last year. The results, however, surpassed the Zacks Consensus Estimate by 6 cents.

Revenues in the quarter hiked 7% year-over-year to $202.5 million, exceeding the Zacks Consensus Estimate of $193 million. Increase in sales volume led the company to operate at full capacity in order to fulfill the customers’ demand.

Superior Industries, which competes with Meritor Inc. ( MTOR - Analyst Report ) .,is the largest manufacturer of aluminum wheels for passenger cars and light-duty vehicles in North America. The company offers a wide range of products in accordance with the recent market trends. Besides, aluminum wheels are more in demand compared to steel owing to its light weight. Currently, 65% of total vehicles and 70% of trucks use aluminum wheels.

Gradual improvements of the automotive industry will have favorable impacts on Superior Industries. The company is expanding its trade with international customers and also mulling for further development in the emerging markets.

A wide customer base covering almost all the important car manufacturing companies adds immensely to the company’s performance. Long-term contracts with the customers also protect it adequately from instability and uncertainty.

However, Superior Industries is under threat due to customer concentration.General Motors Company (GM) and Ford Motor Co. ( F - Analyst Report ) and Chrysler contributed about 76% to the company’s wheel sales in 2011. Ford Motor, General Motors and Chrysler accounted for 35%, 30% and 11%, respectively, to total sales in 2011. In addition, the company faces competition with respect to price, technology, product quality, delivery and overall customer service which thwarts its future growth plan.

Our long-term recommendation is backed by a Zacks #2 Rank, which translates into a short-term (1 to 3 months) “Buy” rating.